property investment business plan south africa

Career Advice

Apr 11, 2019

Starting your Own Property Development Business

The South African property market suffered a significant dip prior to mid-2017, however, it finally seems to be recovering. Since September 2017, property prices have gradually risen – reigniting the market after nearly a decade of weak performance, 1  providing opportunities for emerging developers in South Africa. But, as with the founding of any business, there are far more factors to consider than only the opportunity for growth. If you are thinking of starting a property development business, here are the necessary steps to implement to get you on your way.

1. Acquire the knowledge

It’s vital that educating yourself about the property market is your first step: read property development blogs , watch for property growth reports or past development statistics 2 and learn to identify investment opportunities .

Before embarking on the journey of beginning your own business, make sure you’re well equipped to manage and lead its development. Discover your local competition, understand legislation, property taxes, and your potential target markets. Without acquiring knowledge of the local property industry, its past and future, you will find it difficult to accurately build a business plan that is suitably aligned to your business objectives. 3

2. Build a business plan

Now that you understand your local market and industry, you are in a position to develop long-term goals. It’s important to consider the larger business outcomes when you create the initial foundation of the business plan. 4  Perhaps you want to introduce new affordable property investment options to lower-income brackets, or your business goals aim to create entirely “green” apartment blocks for the city. Whatever your long-term objectives, your business plan should be able to support you in reaching them. 5

Since September 2017, property prices have gradually risen – reigniting the market after nearly a decade of weak performance

Once you’ve settled on your position within the market, you can begin using market research (looking at competitors, and growth opportunities), financial projections (required budgets, cash flow projections, and available tenders) and knowledge of local property law to set your short-term goals. 6 The following steps will see you hiring a team to support the different roles required (property strategists, real estate agents, financial strategists, conveyancers, contractors, engineers, etc.), settling on the nature of your first projects, and giving yourself clear return-on-investments to reach. 7

Learn how to make intelligent investment decisions, conduct property management effectively, and navigate the landscape of property development and entrepreneurship with this online short course.

Entrepreneur Magazine aptly summarises it, “[w]ithout a sound business plan, you’ll be unable to find funding […] it’s also the blueprint of the business and the best way to test whether or not the business is feasible.” 8 Your business plan becomes that much more pertinent if you’re relying on investors to fund the capital growth for your business in its early stages.

The best way to learn is experience

Starting a business is exciting, but it is always going to require that you’re willing to learn and tweak your business’s goals/plan as you progress. As you look at your initial developments, keep the following in mind.

• Location and timing: Property prices are heavily influenced by social, economic, political, and geographic factors. 9 Being aware of trends like the increased rate of commercial property developments in South African city centres will help guide you in making the right investment decisions. 10
• Zoning and title deeds: Every property is zoned for a particular purpose, and being aware of such will help inform your investment and development decisions. 11  Property conditions differ depending on location and property type – these regulations are laid out in the title deed (which can be found in the Deed Registries Office in South Africa), 12 and decide whether or not the conditions fit in with your plans.
• Building regulations: Changes and updates to building regulations require property developers to keep an eye on new legislation and policies as they are introduced. 13 The penalties for not following regulation can be hefty enough to sink young businesses. 14
• Property management: You’ll need to continually reassess built environments according to new legislation, social issues (i.e. water restrictions are increasing the desire for water saving instalments in Western Cape dwellings), 15  and tenants’ needs. 16 However, property maintenance should be focused on longevity, rather than trends or frugality. 17
• Grading levels: There are nine grading levels in South Africa, which limit the value of government tender (a public request for contracted services or products) that companies can apply for. 18 If you plan on applying for private or government tenders, it is vital you know which grading level you fall into (which is decided on according to annual turnover, track record, capability, and capital). 19

Adrien Goslett, CEO of RE/MAX, has recently stated that he anticipates “reinvestment (both local and foreign) in the country post-election if the fight against corruption continues and tough decisions are made”, and went on to say with hope that “[g]reater stability should lead to consumer confidence, and with that a more buoyant real estate market”. 20 While our economy has been slow and volatile in past years, there is optimism for the future, which provides a good foundation of opportunity for emerging property development businesses in South Africa. 

Click here to view sources

• 1 (Feb, 2018). ‘South Africa’s housing market accelerates’. Retrieved from Global Property Guide .
• 2 Yardney, M. (Aug, 2018). ‘How to get started in property development’. Retrieved from Property Update .
• 3 Yardney, M. (Aug, 2018). ‘How to get started in property development’. Retrieved from Property Update .
• 4 Rampton, J. (Aug, 2016). ‘7 steps to a perfectly written business plan’. Retrieved from Entrepreneur .
• 5 (May, 2018). ‘How to start a property development business’. Retrieved from Entrepreneur Mag .
• 6 (May, 2018). ‘How to start a property development business’. Retrieved from Entrepreneur Mag .
• 7 Yardney, M. (Aug, 2018). ‘How to get started in property development’. Retrieved from Property Update .
• 8 (May, 2018). ‘How to start a property business’. Retrieved from Entrepreneur Mag .
• 9 (Jan, 2018). ‘The outlook for South Africa’s property market in 2018’. Retrieved from Private Property .
• 10 Smith, C. (Oct, 2017). ‘Increase in rate of commercial property development’. Retrieved from fin24 .
• 11 (May, 2018). ‘How to start a property development business’. Retrieved from Entrepreneur Mag .
• 12 (May, 2018). ‘How to start a property business’. Retrieved from Entrepreneur .
• 13 (Feb, 2018). ‘Building regulations and by-laws’. Retrieved from MBA North .
• 14 Talane, V. (June, 2013). ‘R1,5bn Construction fines’. Retrieved from Corruption Watch .
• 15 Stevens, P. (Jan, 2018). ‘The outlook for South Africa’s property market in 2018’. Retrieved from Private Property .
• 16 Yardney, M. (Aug, 2018). ‘How to get started in property development’. Retrieved from Property Update .
• 17 (Nd). ‘Regular property maintenance reduces long term costs’. Retrieved from Trafalgar . Accessed on 14 March 2019
• 18 (May, 2018). ‘How to start a property business’. Retrieved from Entrepreneur .
• 19 (May, 2018). ‘How to start a property business’. Retrieved from Entrepreneur .
• 20 (Dec, 2018). ‘SA’s property marketing in 2019: predictions and expectations’. Retrieved from Property 24 .

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Don't make mistakes in south africa.

We've created a guide to help you avoid pitfalls, save time, and make the best long-term investment possible.

How to make a good property investment in South Africa

Last updated on  December 16, 2023

Everything you need to know is included in our South Africa Property Pack

Whether you're interested in a luxury villa in Cape Town , a modern apartment in Johannesburg , or a high-yield rental property in the vineyard-rich region of Stellenbosch , South Africa offers diverse real estate options to meet your investment needs.

However, making a property investment in this country can be challenging, especially with all the new laws and regulations involved.

We're committed to breaking down everything you need to know in a way that's easy to grasp, making it simpler for you. If you have any lingering questions, please feel free to get in touch with us.

Also, for a more detailed analysis, you can download our property pack for South Africa , made by our country expert and reviewed by locals.

How is investing in real estate in South Africa?

Is south africa an attractive destination for property investment.

South Africa has emerged as a compelling destination for property investment due to its unique blend of diverse cultures, beautiful landscapes, and a relatively stable economic environment.

One aspect that makes the South African real estate market attractive is its dynamic nature.

For instance, despite global economic challenges, South Africa's property market has shown resilience with a notable increase in property values. A data point supporting this is the steady rise in house prices, which saw an average increase of around 3.6% in 2020, even amidst the global pandemic.

Historically, the South African real estate market has demonstrated a pattern of steady growth, with occasional fluctuations due to economic and political factors. While the country has faced economic challenges, including periods of recession and inflation, the property market has largely remained robust.

There have been crises, such as the impact of global economic downturns, but the market has consistently recovered, showing long-term growth.

Investments in certain types of properties and regions have tended to perform particularly well. Residential properties in urban areas, especially in cities like Johannesburg, Cape Town, and Durban, are popular among investors.

These areas offer a blend of modern amenities and vibrant cultural experiences, making them attractive for both rental and resale purposes. The budget for these investments varies, but there is a notable trend towards middle-range properties, which offer a balance of affordability and quality.

Additionally, the market for luxury properties in scenic regions such as the Western Cape has also seen substantial growth.

A unique and positive aspect specific to South African properties is the country's architectural diversity. South Africa is renowned for its blend of traditional African designs with Dutch, British, and modern influences, resulting in a rich architectural landscape.

This diversity not only adds aesthetic value but also cultural significance to properties, making them unique investment opportunities.

Regarding the stability and safety of investing in South Africa compared to other countries, it's generally considered a stable environment for property investment. The country's legal framework and property laws are robust, offering protection to investors. Political and economic issues do arise, as in any country, but the overall trajectory has been one of gradual progress and stability.

For international investors, understanding the local language is not a necessity, although it can be beneficial. South Africa is a multilingual country with 11 official languages, but English is widely spoken and is the primary language of business and real estate transactions.

This makes it easier for foreign investors to navigate the market without a language barrier.

What are the trends forecasts for the real estate market in South Africa?

The housing market in South Africa, like many others worldwide, is influenced by a range of factors including economic conditions, political climate, and government policies.

Here's an overview of the trends and potential forecasts for South Africa's real estate market.

South Africa's real estate market has historically been quite resilient, showing growth even in challenging economic times. This resilience is often attributed to the high demand for housing, especially in urban areas and metropolitan cities like Johannesburg and Cape Town.

The demand is driven by a growing middle class, urbanization, and a relatively young population. These factors suggest a positive outlook for property investment, as they indicate a continuing need for both residential and commercial properties.

However, it's important to consider the economic landscape. South Africa has faced economic challenges, including high unemployment rates and inflation. These factors can affect the purchasing power of potential homebuyers, possibly leading to a slowdown in the housing market.

Nevertheless, the real estate sector often serves as a stable investment compared to more volatile markets, especially during times of economic uncertainty. This aspect could keep the demand for property investments steady.

Political stability is another key factor. South Africa has experienced political fluctuations which can impact investor confidence. Stability in government policies and a strong legal system supporting property rights are crucial for maintaining and attracting both local and foreign investment in the real estate sector.

Speaking of government policies, they play a significant role in shaping the real estate market. Policies related to housing subsidies, land use, and property taxes directly affect the market. Any upcoming changes in these areas could have significant implications.

For instance, policies aimed at improving housing affordability can increase market participation, while changes in property taxes might affect investment returns.

Additionally, infrastructure development is a key driver. Government investment in infrastructure like roads, public transport, and utilities can increase the value of nearby properties by improving accessibility and living conditions.

This makes certain areas more attractive to investors and homebuyers.

Environmental policies and building regulations are becoming increasingly relevant. As concerns about climate change grow, there could be a shift towards sustainable housing, impacting construction trends and property values.

Properties that adhere to environmentally friendly practices might become more desirable, potentially driving up their value.

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What types of property can you buy in South Africa? What are the prices and yields?

If you need a detailed and updated analysis of the prices, rents and yields, you can get our full guide about real estate investment in South Africa .

Investing in property in South Africa offers a range of opportunities, with various types of properties available. You can invest in residential properties, commercial buildings, and even in agricultural land.

Building a property is certainly doable, but it requires a significant investment of time, money, and knowledge of local building regulations and market conditions.

In terms of residential properties in cities, the average cost can vary widely based on location, size, and quality. For instance, properties in upscale areas of major cities like Johannesburg, Cape Town, and Durban are generally more expensive than those in smaller towns or less developed areas.

As a rough estimate, you might find apartments in city centers priced anywhere from a couple of hundred thousand to several million South African Rand (ZAR).

The ratio of renters to owners in South Africa has been shifting slightly in favor of renting, particularly in urban areas. This is due to a combination of factors, including affordability challenges, lifestyle preferences, and mobility needs of the younger population.

Many people do buy properties with the intention to let them out. This buy-to-let market is quite active, and rental yields can be attractive, especially in high-demand urban areas. Rental yield potential often ranges between 5% to 10%, but this can vary depending on the location and type of property.

Rental demand in cities is generally high, driven by people who move for employment, education, or lifestyle reasons. This demand supports a healthy rental market, making it a viable option for property investors.

Moreover, tourism has a significant impact on the property market, especially in popular tourist destinations like Cape Town. The demand for short-term rentals increases during peak tourist seasons, which can lead to higher rental prices and potentially lucrative returns for property owners who offer their properties as vacation rentals.

Reselling property in South Africa can be relatively straightforward, but the ease of sale and the time it takes to sell a property can vary. Factors like location, property condition, and market conditions play a significant role. In a buoyant market, properties can sell quickly, but in slower economic times, it might take longer.

Typical holding periods for investment properties range from a few years to a decade or more. This period depends on your investment strategy and market conditions.

Capital gains prospects are also variable. In a growing economy and property market, you could see significant appreciation in property values, but this isn't guaranteed. It's important to be aware that property markets can fluctuate, and values can both rise and fall.

Which regions in South Africa offer the best investment opportunities?

Foreigners looking to buy property in South Africa often gravitate towards certain areas due to their unique appeal, investment potential, and lifestyle offerings.

The reasons for purchasing property vary, including investment opportunities, retirement plans, or a desire for a holiday home.

One of the most popular regions among foreign buyers is the Western Cape, particularly around Cape Town. This area is renowned for its stunning scenery, including the iconic Table Mountain and beautiful beaches.

The city's rich cultural heritage and modern amenities make it an attractive destination. Areas like the Atlantic Seaboard and the Winelands are particularly popular for their luxury homes and scenic beauty.

Gauteng, especially around Johannesburg and Pretoria, also attracts foreign buyers. These cities are the economic powerhouses of South Africa, offering opportunities for business investment. The property market here tends to be vibrant, with a mix of residential and commercial real estate.

Durban, in the KwaZulu-Natal province, is another attractive spot. Known for its warm climate and Indian Ocean coastline, it appeals to those looking for a more relaxed lifestyle.

Budget-friendly options are available in regions like the Eastern Cape and Limpopo. These areas offer a more laid-back lifestyle and are often considered for retirement or holiday homes. The cost of living and property prices are generally lower, making them attractive for those looking for value investments.

In terms of trends, areas like the Garden Route are gaining popularity. This region is known for its natural beauty and is becoming a hotspot for both local and international buyers. Its appeal lies in its blend of small-town charm and natural landscapes.

The pros and cons of each region vary. For instance, Cape Town offers a vibrant lifestyle but can be expensive, while Johannesburg offers business opportunities but has higher crime rates. Durban is known for its beautiful beaches but is also prone to humidity and heat.

Predicting future trends, areas around major cities like Cape Town and Johannesburg may continue to see growth due to ongoing urban development and economic opportunities. Suburbs that offer a balance of lifestyle and affordability, like those in the Western Cape's smaller towns, might also see an increase in demand.

Regions to be cautious about include those with high crime rates or political instability. Also, areas that are too remote may not offer the best investment returns due to lower rental demand and limited growth potential.

Here is a summary table to help you visualize better. If you need more detailed data and information, please check our property pack for South Africa .

Make a profitable investment in South Africa

Better information leads to better decisions. Save time and money. Download our guide.

Who can invest in real estate in South Africa?

Investing in property as a foreigner in south africa.

Investing in housing property in South Africa as a foreigner is a process that's quite straightforward, with many similarities to how locals purchase property, but with a few notable differences. A

s a foreigner, you have the right to own property in South Africa, including both houses and apartments. You're also allowed to own land, which is a significant aspect that many foreign investors find attractive.

Regarding the restrictions based on your country of origin, South Africa does not discriminate.

Whether you're from Europe, Asia, America, or any other region, the rules for owning property remain consistent. This uniform approach helps in simplifying the process for international investors.

Living in the country is not a prerequisite for purchasing and owning property in South Africa. You can buy property even if you're living abroad and do not have any immediate plans to move to South Africa.

However, if you're planning to live in the property you purchase, you should be aware of the visa and residency requirements, which are separate from property ownership.

Speaking of visas, owning property in South Africa does not necessitate a residence permit. You can own property on a tourist visa, but remember that this won't affect your immigration status. Ownership of property does not grant you residency rights.

There are no time limits on how long you can own the property as a foreigner. You can keep it for as long as you wish and can also pass it on to your heirs or sell it to another foreigner. The process for inheritance or resale remains the same as for local citizens, with no additional restrictions specifically targeted at foreigners.

In terms of documentation, you'll need a Tax Identification Number (TIN) from the South African Revenue Service. This is essential for the property transaction and subsequent tax obligations.

Additionally, while purchasing property, you'll typically need to provide identification documents, proof of income, and sometimes a letter of recommendation from your bank.

You don't necessarily need a local bank account to purchase property, but it's highly recommended. Having a local account simplifies the process of transferring funds and paying for ongoing expenses related to the property, like utilities or property taxes.

However, regarding payments, it's important to note that all transactions in South Africa must be done in the local currency, the South African Rand (ZAR). This means that even if you're a foreign investor, you'll need to convert your funds to ZAR for the transaction.

When it comes to taxes, foreigners are generally subject to the same tax rates as South African citizens. This includes property taxes and capital gains tax if you decide to sell the property. It's crucial to be aware of these tax implications and plan accordingly.

Finally, there's no need for a specific authorization from a governmental institution to purchase property as a foreigner.

However, the process involves legal checks, such as ensuring the property is not encumbered and that the seller has the right to sell it.

It's advisable to engage with a local real estate agent or a legal advisor to navigate the process smoothly and ensure all legal requirements are met.

Residency and investment in South Africa

South Africa did not have a direct investment-for-residency program linked specifically to real estate purchases.

However, it's important to understand the broader context of how residency can be obtained in South Africa, and how property ownership might play a role in this process.

Residency in South Africa is typically acquired through either employment, starting a business, or family ties.

For instance, if you're employed by a South African company or start a business that meets certain criteria, you can apply for a temporary residence visa. This can potentially lead to permanent residency after a period of time, provided you meet all the ongoing requirements.

Owning property in South Africa does not in itself grant you residency. However, owning property can be an asset when applying for a visa or residency, as it demonstrates your commitment to staying in the country and can be a part of your financial proof.

For those looking to start a business in South Africa, owning property could potentially be part of your business plan or investment.

The minimum investment required for starting a business, which could lead to residency, varies depending on the type of business and other factors. It's not a fixed amount and each case is assessed individually.

The number of people who have used business or investment routes to gain residency in South Africa is not specified, as it fluctuates and is subject to changes in immigration policy.

Residency obtained through employment or business investment is usually temporary at first, often lasting for a few years.

You must renew your visa and eventually may apply for permanent residency after meeting certain criteria, such as duration of stay and continued investment or employment.

Permanent residency does not automatically grant you citizenship. The path to citizenship in South Africa typically involves first being a permanent resident for a number of years, showing continuous residence in the country, and meeting other criteria set by the government.

It's crucial to note that immigration policies can change, and it's always advisable to consult with a legal expert or immigration consultant who specializes in South African immigration law for the most current information and personalized advice based on your specific circumstances.

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How to get started to invest in real estate in South Africa?

What is the step-by-step process to buy property in south africa.

We'll give her a brief overview. However, there is a detailed and dedicated document to the buying process in our property pack for South Africa .

Buying a property in South Africa can be a unique experience, especially if you're not familiar with the local processes. The journey from finding your ideal home to finally owning it involves several steps.

First, once you've found a house you like, you make an offer to purchase. This is a formal, written document stating your intent to buy the property at a certain price. It's crucial to get this document right because it forms the basis of the sale agreement. If the seller accepts your offer, it becomes a legally binding contract. Here, the most common challenge is agreeing on the price and terms. Negotiations can be tricky, and it's often where deals fall through.

After the offer is accepted, you enter the due diligence phase. This involves getting a home inspection to check for any structural issues, and you might also want to do a pest inspection. This step is crucial as it uncovers any potential problems with the property that could be costly to fix later. It's at this stage that deals can sometimes unravel if significant issues are found.

The next step is securing financing. If you're taking out a mortgage, this involves applying to a bank or financial institution and awaiting their approval. This can be time-consuming, as the bank assesses your creditworthiness and the property's value. It's a step that often takes longer than expected, especially if there are issues with your credit history or the property valuation comes in lower than anticipated.

Once your finance is secured, the process of transferring the property into your name begins. This involves lawyers and the Deeds Office. The transfer process includes several legal steps, like ensuring there are no outstanding debts against the property, paying transfer duties, and registering the new title deed. This part of the process is generally straightforward but can be slow, often taking several weeks or even months. The Deeds Office, in particular, can be a bottleneck due to bureaucratic delays.

An unusual aspect in South Africa is the role of the conveyancing attorney, who handles the legal transfer process. This is different from many other countries, where a title company or notary might handle this.

The conveyancer is usually appointed by the seller but paid for by the buyer. They play a crucial role, so choosing an experienced conveyancer can make this process smoother.

Regarding language, it certainly helps to know English or Afrikaans, the two most widely spoken languages in South African business contexts. However, it's not absolutely necessary. Many real estate agents, lawyers, and bankers are used to dealing with foreign buyers and can provide assistance in various languages. But, not knowing the local language might slow you down a bit, especially in understanding legal documents and contracts.

Culturally, it's important to be aware of local norms and practices. For instance, in South Africa, it's common for negotiations to be quite direct and straightforward. Being too aggressive or too passive can both be misinterpreted.

Also, understanding the importance of community in certain areas can be vital. In some neighborhoods, especially in rural or traditional areas, community approval or involvement might play a role in the buying process.

Looking for property in South Africa

Please note that there is a list of contacts (real estate agencies, lawyers, notaries, etc.) and websites in our pack of documents related to the real estate market in South Africa .

In South Africa, the search for a house involves a mix of modern and traditional methods.

Many people start their search online. Housing portals like Property24, Private Property, and Gumtree are popular for browsing listings. These websites provide a wide range of options, from apartments in urban areas to houses in the suburbs and countryside. They allow you to filter by location, price, and type of property, making it easier to find what you're looking for.

Real estate agents also play a significant role in the South African property market. They often have listings that are not yet available online or are exclusive to their agency. Working with a real estate agent can be particularly beneficial because they have in-depth knowledge of local markets, can provide insights into neighborhoods, and help with negotiations.

However, not all agents are equally reliable. It's important to work with an agent who is registered with the Estate Agency Affairs Board (EAAB) of South Africa. This ensures they are licensed and adhere to certain professional standards.

Social media platforms and local online forums can be useful, especially in specific communities or neighborhoods. Facebook groups and community forums often have postings about properties for sale or rent. These platforms can also provide insights into what living in a particular area is like.

When working with real estate agents, it’s important to understand their role and the nature of their listings. Some agents work primarily with sellers, while others may focus on representing buyers. In South Africa, a buyer's agent will help you find a property, negotiate the price, and guide you through the purchase process, while a seller's agent focuses on marketing the property and negotiating the best sale price for the seller. It’s not uncommon for agents to provide listings directly to potential buyers, especially those they think will be a good fit for your needs and preferences.

The commission for real estate agents is not standardized and can vary. It's typically negotiated between the agent and their client. In most cases, the seller pays the agent's commission, which is usually a percentage of the sale price. As a buyer, it's less common to pay a commission, but it's important to clarify this with your agent.

When dealing with real estate agents in South Africa, good negotiation strategies include being clear about your budget and requirements, showing that you are informed about the market, and being ready to move quickly if you find the right property.

It’s also advisable to ask for references or testimonials from previous clients to ensure the agent's credibility.

Buying property in South Africa

Negotiation is quite common when buying a house in South Africa. It's a part of the buying process where you can potentially save a significant amount of money.

The amount you should negotiate off the selling price depends on various factors like the condition of the property, how long it's been on the market, and the current market conditions. Generally, buyers start by offering around 5% to 10% less than the asking price. However, this can vary widely based on the specific circumstances of each sale.

Conducting due diligence is a critical part of the property buying process. This involves a series of steps to ensure that you're making a sound investment. You should start with a thorough inspection of the property. This means checking for structural issues, ensuring that the property is in the state as presented by the seller, and possibly getting a professional home inspection done.

It's also wise to research the neighborhood, including future development plans, crime rates, and local amenities.

A crucial part of due diligence is conducting a title search and ensuring clear title ownership. This process verifies that the seller legally owns the property and has the right to sell it. It also checks for any encumbrances like liens or easements that might affect your ownership. In South Africa, this is typically done by a conveyancing attorney.

While it's not mandatory to hire a lawyer or a notary, it's highly recommended, especially if you're unfamiliar with the process. A conveyancing attorney will handle the legal aspects of the transfer. They ensure that all necessary documents are in order and that the property is legally transferred to you. The cost of hiring a conveyancing attorney can vary, but it generally includes a base fee plus additional costs related to the value of the property.

Regarding the specific documents required for the purchase, you'll need a valid offer to purchase or sale agreement, which is a legally binding document once signed by both parties. You'll also need proof of identity and residence, and if you're getting a mortgage, you'll need to provide proof of income and creditworthiness. Your conveyancer will guide you through the specifics of what's needed.

The official transfer and registration of property ownership is a multi-step process. After the sale agreement is signed and any conditions (like obtaining a mortgage) are met, the conveyancer prepares the necessary documents for transfer. These documents include a deed of transfer and declarations by the buyer and seller.

The buyer is also required to pay transfer duty to the South African Revenue Service (SARS), which the conveyancer usually handles.

Once everything is in order, the conveyancer submits the documents to the local Deeds Office. The Deeds Office records the transfer of property, and this is when the property officially changes hands. The process from signing the sale agreement to the registration of the property can take several weeks or even months, depending on various factors like the efficiency of the Deeds Office and the complexity of the transaction.

Buying real estate in South Africa can be risky

An increasing number of foreign investors are showing interest in South Africa. However, 90% of them will make mistakes. Avoid the pitfalls with our comprehensive guide.

Financing a property in South Africa

Foreign investors looking to finance property investments in South Africa have several options, but they face certain restrictions and additional requirements compared to local buyers.

Typically, foreign investors can apply for a mortgage from South African banks. However, banks may be more cautious and might require a larger deposit due to the perceived higher risk. The deposit is generally paid after the purchase agreement is signed but before the transfer process is complete. It acts as a show of commitment to the purchase.

The full price of the house, or the balance after the deposit, is usually paid upon completion of the transfer process, either through mortgage financing or other means. The timing of these payments will be outlined in the purchase agreement.

Getting a loan as a foreigner is possible but can be more challenging than for residents. South African banks typically offer mortgages to foreigners with certain conditions. The loan-to-value ratio (LTV) for foreigners is often lower, meaning you might need to put down a larger deposit. For foreign investors, the required deposit is often in the range of 30% to 50% of the property's value, compared to around 10% to 20% for local buyers.

Interest rates for mortgages can vary widely based on the bank, your financial status, and market conditions. Generally, interest rates in South Africa might be considered high compared to some other countries.

When it comes to closing costs and fees, there are several to consider. These include transfer duty, which is a tax paid to the government on properties above a certain value. The rate of transfer duty varies depending on the property's value but can range from 3% to 13% for higher-value properties.

Additionally, there are conveyancing fees for the attorney handling the property transfer, which also vary based on the property's value.

Other costs include registration fees for registering the mortgage with the Deeds Office and potentially a bank initiation fee if you're obtaining a mortgage. These costs can add several thousand Rand to the total price.

Property tax rates in South Africa are determined by local municipalities and vary based on the location and value of the property. They are typically a small percentage of the property's value and are paid annually.

Capital gains tax is another consideration for investors. If you sell the property for more than you paid, you'll be liable for capital gains tax on the profit. This rate varies but can be up to 18% for non-residents.

What are the risks and pitfalls when buying property in South Africa?

Investing in property in South Africa, like any investment, comes with certain risks that need careful consideration, especially for foreign investors who might not be as familiar with the local context.

One of the primary concerns is the security of property rights. While foreign investors do have property rights in South Africa, these are subject to the country's laws and regulations. It's crucial for foreign investors to understand these legal frameworks to ensure their investments are secure. This includes being aware of any restrictions or specific requirements for foreign property ownership.

A unique challenge faced by foreign investors in South Africa is the potential for regulatory and economic changes. The country's economic and political landscape can be dynamic, which might lead to sudden regulatory shifts impacting property investment. For example, changes in land reform policies or foreign ownership laws can significantly affect the value and legality of a property investment. Therefore, staying informed about the local economic and political climate is essential.

Environmental factors also play a significant role in property investment decisions in South Africa. The country has diverse climatic regions, and certain areas are prone to environmental risks like flooding, wildfires, or drought. Climate change implications, such as rising sea levels, are particularly pertinent for coastal properties. These environmental risks can impact property values and should be factored into any investment decision.

When it comes to protecting your investment, insurance is a key consideration. Property insurance, including building and contents insurance, as well as liability insurance, can provide financial protection against a range of risks like natural disasters, theft, or accidents on the property. Ensuring adequate coverage is in place can mitigate potential financial losses.

Despite these risks, South Africa's legal system offers protections for property investors, including foreigners.

The country has a robust legal framework that allows for dispute resolution through the courts. This system offers a recourse for investors facing issues with their property investments, such as contractual disputes or property rights challenges.

However, navigating the legal system can be complex and time-consuming, highlighting the importance of seeking local legal advice and guidance.

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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

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How to Start a Real Estate Business in South Africa?

• 27 June 2023
• views 1,588

Are you considering starting a real estate business in South Africa? With its growing economy and diverse property market, South Africa offers excellent opportunities for real estate entrepreneurs. However, venturing into this industry requires careful planning, market understanding, and knowledge of legal and regulatory aspects. In this comprehensive guide, we will walk you through the essential steps to kickstart your real estate business in South Africa.

Table of Contents

Introduction, 1.1 real estate trends, 1.2 market analysis, 2.1 business registration, 2.2 licenses and permits, 2.3 compliance and regulations, 3.1 networking opportunities, 3.2 collaborating with professionals, 4.1 investment options, 4.2 securing loans, 5.1 finding potential properties, 5.2 property evaluation, 6.1 developing a brand, 6.2 online marketing strategies, 7.1 hiring and managing employees, 7.2 expanding your portfolio, 8.1 economic factors, 8.2 competition, frequently asked questions.

Starting a real estate business is an exciting endeavor that can lead to financial success and personal fulfillment. However, it is essential to approach it with the right strategy and mindset. In this article, we will provide you with valuable insights and actionable steps to help you establish and grow your real estate business in South Africa.

1. Understanding the Market

Before diving into the real estate business, it’s crucial to familiarize yourself with the current market trends in South Africa. Stay updated on the demand for residential, commercial, and industrial properties, as well as emerging neighborhoods and investment hotspots.

Conduct a comprehensive market analysis to identify potential opportunities and assess competition. Analyze property prices, rental rates, vacancy rates, and other relevant data to make informed decisions about your investment strategy and target market.

2. Legal and Regulatory Considerations

To ensure a smooth and compliant operation, you need to understand the legal and regulatory framework for real estate businesses in South Africa.

Begin by registering your business with the Companies and Intellectual Property Commission (CIPC) in South Africa. Choose an appropriate business structure and consult with a legal professional to navigate the registration process smoothly.

Check the specific licenses and permits required to operate a real estate business in your target area. These may include estate agency licenses, fidelity fund certificates, and other regulatory requirements imposed by the Estate Agency Affairs Board (EAAB).

Familiarize yourself with the legal obligations and compliance regulations related to real estate transactions, property management, and financial reporting. This includes adhering to the Consumer Protection Act, the Financial Intelligence Centre Act, and other applicable laws.

3. Building a Strong Network

Success in the real estate industry heavily relies on building a robust network of professionals and potential clients.

Attend industry events, conferences, and seminars to meet fellow professionals, potential investors, and influential individuals in the real estate sector. Join local real estate associations and actively engage in networking activities to expand your connections.

Form strategic partnerships with professionals such as real estate agents, property developers, architects, and lawyers. Collaborating with experts in different areas of the industry can enhance your business’s credibility and open doors to valuable opportunities.

4. Financing Your Real Estate Business

Securing adequate funding is crucial for starting and growing your real estate business. Explore various financing options and determine the most suitable approach for your venture.

Consider different investment models, such as using your own capital, forming partnerships, seeking private investors, or applying for business loans. Each option has its pros and cons, so carefully evaluate the financial implications and align them with your business goals.

If you decide to seek financing through loans, approach banks and financial institutions specializing in real estate lending. Prepare a comprehensive business plan, including financial projections, to demonstrate the profitability and viability of your real estate business.

5. Property Sourcing and Evaluation

Finding and evaluating properties are vital aspects of running a successful real estate business.

Explore multiple channels to identify potential properties, such as online listings, auctions, real estate agents, and personal networks. Develop a keen eye for identifying properties with potential for growth and profitability.

Perform thorough due diligence on each property before making a purchase. Assess factors like location, market demand, potential return on investment, legal aspects, and property condition. Engage professionals, such as property inspectors and appraisers, to ensure accurate evaluations.

6. Marketing and Advertising

Effective marketing and advertising strategies play a pivotal role in attracting clients and growing your real estate business.

Create a compelling brand identity that resonates with your target audience. Develop a logo, website, and marketing materials that reflect your unique value proposition and professionalism. Consistently communicate your brand’s message across different marketing channels.

Leverage digital marketing techniques to reach a wider audience and generate leads. Establish a strong online presence through a well-designed website, search engine optimization (SEO), social media marketing, and targeted online advertising campaigns.

7. Managing and Growing Your Business

To ensure long-term success, focus on effective business management and continuous growth.

As your business expands, consider hiring a competent team to support various functions, such as property management, marketing, and administration. Implement efficient systems and processes to streamline operations and maintain high-quality service.

As you gain experience and build a solid foundation, aim to expand your real estate portfolio. Diversify your investments by exploring different property types, locations, and investment strategies. Continuously assess market conditions and adjust your portfolio accordingly.

8. Overcoming Challenges

The real estate industry is not without its challenges. Be prepared to overcome obstacles and adapt to changing market conditions.

Monitor economic trends and fluctuations that can impact the real estate market. Stay informed about interest rates, inflation rates, and government policies that may influence property prices and demand.

Competition in the real estate industry can be fierce. Differentiate your business by offering unique value propositions, exceptional customer service, and innovative solutions. Stay updated on industry trends and embrace technology to stay ahead of the competition.

Starting a real estate business in South Africa requires careful planning, market analysis, and compliance with legal regulations. By following the steps outlined in this guide, you can lay a solid foundation for success and navigate the challenges of the industry. Remember to continuously adapt, learn from experiences, and nurture relationships to thrive in the dynamic real estate market.

• Can I start a real estate business without prior experience? Starting a real estate business without prior experience is possible but challenging. It’s beneficial to have a basic understanding of the industry, market trends, and legal requirements. Consider gaining experience by working with a real estate agency or partnering with experienced professionals to learn the ropes before starting your own venture.
• How much capital do I need to start a real estate business in South Africa? The amount of capital required to start a real estate business in South Africa can vary depending on factors such as your business model, target market, and investment strategy. It’s important to create a detailed business plan that outlines your expenses, including licensing fees, marketing costs, office space, staff salaries, and initial property investments. It’s recommended to have a substantial amount of capital or access to financing to ensure a solid start.
• What are the main factors to consider when evaluating a property? When evaluating a property, consider factors such as location, market demand, potential return on investment, property condition, and legal aspects. Assess the proximity to amenities, transportation, schools, and employment hubs. Conduct thorough research on market trends, property prices, and rental rates in the area. Additionally, evaluate the property’s structural integrity, maintenance requirements, and any legal issues that may affect its value.
• Do I need a real estate license to operate in South Africa? Yes, you need a real estate license to operate legally in South Africa. The Estate Agency Affairs Board (EAAB) regulates the industry and requires real estate professionals to obtain valid estate agency licenses. To obtain a license, you must meet specific educational requirements, undergo training, and pass the required examinations. It’s essential to comply with these regulations to ensure a legitimate and reputable operation.
• What are some effective marketing strategies for real estate businesses? Effective marketing strategies for real estate businesses include developing a strong online presence through a well-designed website, utilizing search engine optimization (SEO) techniques, and leveraging social media platforms to showcase properties and engage with potential clients. Networking, attending industry events, and collaborating with professionals can also help expand your reach. Additionally, traditional marketing methods such as print advertisements, direct mail campaigns, and signage can still be effective in reaching local audiences.
• How do I find potential investors for my real estate business? Finding potential investors for your real estate business can be achieved through networking events, real estate forums, and industry conferences where you can connect with individuals interested in real estate investments. Join local business organizations, seek referrals from existing contacts, and consider utilizing online platforms specifically designed for connecting real estate entrepreneurs with investors. Develop a compelling business plan and pitch to showcase the potential returns and benefits of investing in your real estate business.
• Are there any specific tax obligations for real estate businesses in South Africa? Yes, real estate businesses in South Africa have specific tax obligations. It’s crucial to consult with a tax professional or an accountant who specializes in real estate to ensure compliance with the tax regulations. Some tax considerations may include property tax, capital gains tax, rental income tax, and value-added tax (VAT). Keeping accurate financial records and submitting tax returns on time is essential to avoid any penalties or legal issues.
• How long does it take to establish a profitable real estate business? The timeline to establish a profitable real estate business can vary based on several factors, such as the local market conditions, your business strategy, marketing efforts, and the economy. It typically takes time to build a client base, establish a solid reputation, and generate consistent revenue. It’s important to set realistic expectations and have a long-term perspective when starting a real estate business as success often comes with patience, perseverance, and continuous efforts.
• What are the common challenges faced by real estate entrepreneurs? Real estate entrepreneurs often face challenges such as fierce competition, economic fluctuations, changing market conditions, and regulatory compliance. Finding suitable investment opportunities, securing financing, and managing cash flow can also be challenging. Additionally, staying updated on industry trends, maintaining a strong network, and adapting to technological advancements are crucial for long-term success in the real estate industry.
• Can I invest in real estate with a limited budget? Yes, it is possible to invest in real estate with a limited budget. Consider options such as investing in smaller properties, starting with partnerships or joint ventures, or exploring crowdfunding platforms that allow fractional ownership. Additionally, you can explore creative financing options like seller financing or lease-to-own arrangements. Conduct thorough research, consult with professionals, and carefully assess the risks and potential returns associated with each investment opportunity.

Remember to seek professional advice and conduct thorough research before making any significant financial decisions related to starting a real estate business.

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Real estate is a term that encompasses a vast and diverse industry associated with the ownership, management, development, and transaction of property. It refers to land and any physical structures or improvements attached to it, such as buildings, houses, apartments, offices, retail spaces, and more. Real estate is a crucial part of the economy and […]

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5 Steps to building a property portfolio in SA

You don't need sizable capital to get on the property ladder. here's how to start a property portfolio that will generate wealth in the long-term..

Article summary

• You don’t need massive amounts of capital to start a property portfolio. A bank can fund your property purchase, although you need to have a healthy credit record.
• Research the market, such as which types of property are doing well and where are the best places to invest.
• Consider investing as part of a group. Known as co-buying, this is a popular way for first-time buyers to get on the property ladder.

Property has always been considered a safe long-term investment. If you have money to invest, property is generally the thing to invest in if you want to be confident of growing your profits over time.

Here are some tips for investing in property .

• Research the market.
• Assess your financial situation.
• Start small.
• Consider investing as part of a group.
• Secure finance.

1. Research the market

Find out what types of property investments are proving most profitable, what types of property are generating the most income, and where the best locations to invest are.

For example, there are several types of properties, including:

• Commercial property.
• Residential property.
• Industrial property.

You need to decide which type to invest in. How will you know unless you investigate which ones are performing?

For example, as of 2023, Commercial property generates higher profit than residential property (the Capex rate shows +11% for commercial properties, versus 5-8% for residential properties).

Note It helps you employ an estate agent to get the best advice on movements in the property market.

Buy-to-let is the bread and butter of property investment.

It helps to know that as of 2023, the buy-to-let market is surging in the Western Cape.

ooba Home Loans data shows that 32.9% of Western Cape’s property demand stemmed from buy-to-let applications in June 2023 alone, an increase from 21.5% in March 2020.

2. Assess your financial situation

• You don’t need massive amounts of capital to invest in property. The bank will fund your purchase provided you meet their criteria.
• The most important criterion is to have a good credit record .
• You can maintain a good credit record by clearing debts, paying bills on time, and reducing your credit ratio (the gap between the amount you owe and the limit to your credit) to below 30%.
• You need a credit score of at least 610 for the bank to consider your home loan application, while anything above 661 is considered a decent credit score.
• You can find out your credit record by getting prequalified with ooba Home Loans (see below).

3. Start small

• For example, you could invest in a small residential property in an area where prices are increasing.
• You can invest in a residential property to renovate it to improve value .
• This is another reason to do your research into the property market.

4. Consider investing as part of a group.

• Co-buying is when two or more people purchase a property together, dividing the home loan repayments and management costs between themselves.
• This is an option employed by couples, friends, and business partners.
• It’s a good way for first-time homebuyers to get on the property ladder, as sharing the bond provides a sense of security.
• Co-buying is on the rise in the South African property market. ooba Home Loans reports that of joint applications received, 75.3% were purchased with a spouse, whereas 24.7% were purchased with others (such as business partners or relatives).

5. Secure finance

• The standard way to fund a property purchase is to apply for a home loan.
• Again, a healthy credit record improves your chances of your application being approved.
• You can get the best deal on your home loan by applying to multiple banks with ooba Home Loans. We submit your application to multiple banks and allow you to compare deals and choose the best one.
• We also offer a range of tools that can make the homebuying process easier.  Start with our Bond Calculator , then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan .

An important step: Find out what you can afford

Once you decide to take the plunge, first get prequalified to find out what you can afford. Prequalification will also assess your credit record so you can determine your chances of home loan approval.

You can get prequalified by contacting an expert at ooba Home Loans or by using our free, online prequalification tool, the Bond Indicator .

Get prequalified for a home loan today

DIY with our online prequalification tool, or speak to an expert.

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A Basic Guide to Investing in Property in South Africa

A quick drive around South Africa’s major cities such as Johannesburg, Cape Town, and Pretoria reveals one unmissable feature: amid shiny, high-rise buildings, towering cranes compete for attention as they transport hefty loads up and down new under construction buildings. It’s a familiar sight that greets you in many metros across the continent. The growth of Africa’s cities is driving demand for more commercial and residential property.

For South Africa , this growth has persisted for years as the country’s urban middle class expands, creating a need for new houses, shopping malls, and office blocks. Despite the Southern African nation’s current economic and political distress, real estate remains an attractive opportunity for investors.

Before you jump at the opportunity to invest in property in South Africa, here’s a quick guide to help you prepare for your venture.

Consider buying to let.

The buy-to-let strategy is one of the easiest ways to invest in property. It’s no wonder it seems to be a favourite for many investors in the South African real estate market. While it has its risks, like any other strategy, purchasing property to rent out is a sound investment choice whose benefits far outweigh its shortcomings. One person who believes in this strategy is Jason Lee, the best-selling author of Making Money Out of Property in South Africa , and two other property books.

“Buy-to-let properties make fantastic retirement products if you buy right and have patience. The tenants contribute or cover your mortgage payments so they essentially pay for or assist in paying for an asset that you own,” Lee shares. He adds,  “Over time, the balance on your mortgage becomes lower while the value and rental income from the property increases. This gives you options in retirement. You can either sell the property to access the capital gain or keep the property and collect cash flow in the form of monthly rent payments.”

Before you commit to buying property, it’s important to calculate the potential yield on the property. You can simply do this by calculating the annual rental income minus expenses – such as maintenance – and divide it by the price you pay for the property. Also, find out the yield of other rental properties in the same area to avoid paying an unfair price for the property. Doing sufficient research can mean the difference between having a sound investment and a botched venture.

When buying property to rent out, one other key factor to consider is housing affordability, says Lee. “Affordability is always an issue and that is why I like to concentrate on the middle-income bracket that low income buyers can aspire to and high-income buyers can downsize to,” he explains.

Choose the Type of Property That Delivers Best Returns

If you’re looking for an investment opportunity in the residential market, it’s always critical to know which types of property are best performers. In South Africa, data reveals that one bedroom and studio apartments have been the best-performing for over 12 years. Investors who choose a one-bedroom apartment receive better returns than those who invest in a two or three-bedroom flat. However, more South Africans continue to purchase two-bedroom apartments despite lower returns.

One-bedroom apartments are entry-level choices for most young professional first-time home buyers, says CEO of Landsdowner Investment Properties, Jonathan Kohler. “The thinking behind this is that two people could rent the property together or two people could perhaps purchase the property. However, this has simply not been the case, and investors in this market are not reaching their maximum return. Investors looking to purchase a property must keep two of the key principles in mind – rental return and capital appreciation,” explains Kohler.

“Whether you’re a student, living away from home for the first time, a young professional renting your first apartment that you’re paying for yourself, a first-time homeowner or a first-time investment property buyer with buy-to-let aspirations, the one-bed-one bath is generally a good place to start,” says Kohler

To illustrate the different returns investors fetch from the different apartments, Kohler uses the example of two apartments located in the same complex in Johannesburg’s northern suburbs. If you buy a one-bedroom ground floor apartment for R740,000 (US $57,045), you can receive up to R7,000 (US $540) a month in rent and spend roughly R977 (US $75) on levies and R320 (US $25) on rates. You can expect this apartment to appreciate at 8% per annum, which means you could get a net rental return of 9.25% per annum, a remarkable overall return on investment of 17.25%.

On the other hand, a two-bedroom ground-floor apartment that costs about R980,000 (US $75,538) would bring you about R8,250 (US $636) in monthly rental fees. It would cost you R1,50 (US $127) and R420 (US $32) in levies and rates respectively – bringing you a rental return of 7.25% per annum and a total return on investment of 15.25%.

It’s All About Location!

As the saying goes, “The three most important aspects of real estate are location, location, location!” It’s vital to ensure the property you’re buying is in a desirable place to keep its resale value rising. The location is also a determining factor in how long a property takes to sell.

In South Africa, the Western Cape province continues to outperform all other areas, with Cape Town remaining the most lucrative city in the country. The strength of its housing market and house price inflation, which has risen by over 10.35%, make the Mother City an attractive property investment destination for investors.

Several factors make the coastal province king of South Africa’s property market. Dr. Andrew Golding, Chief Executive of the Pam Golding Property Group, explains: “The outperformance of the Western Cape housing market relative to both Gauteng and KwaZulu-Natal began in mid-2013 – which more or less coincides with the start of the “semigration” of buyers to the Cape. Factors fuelling movement to the Cape – the appeal of a proven record of service delivery, access to excellent schooling and the attractive lifestyle – are showing no signs of slowing down.”

Dr. Golding adds: “Over and above this Cape Town metro trend, buyers relocating to the Western Cape are also settling in other urban areas such as Paarl, Somerset West and Stellenbosch, as well as along the coastline. A further noteworthy trend is an ongoing increased demand for agricultural property for lifestyle as well as for commercial use. Most sought-after among lifestyle buyers are small scale (8-20ha) farms in the Elgin and Grabouw Valley priced between R7 million and R20 million.”

While Cape Town ranks as the most expensive city in the country, there are still some areas where you can find a good deal. These include the likes of Goodwood, Richwood, Bothasig, Edgemead, and Monte Vista.

Residential Property Remains Strong in South Africa

The question of whether to invest in residential or commercial property can be a tricky one, especially if you’re not armed with information to back your decision. While both property types offer different advantages and disadvantages, residential real estate remains sturdy in South Africa. It’s also the better option for the less experienced investor with limited property experience.

However, while residential property retains a positive outlook, its performance is slowing down thanks to consumers’ wavering sentiments. Properties are remaining longer on the market, with this year’s average being 15 weeks compared to 11 weeks in 2016 – according to South African bank, Absa. The bank also reports a drop in 2017’s asking prices, with 92% of the houses selling below market price versus 2016’s 88%. This may prove to be a good time for foreign investors to enter the South African market.

In fact, recent years have seen the country attract more foreign direct investment into property. In 2014, R9,7 billion worth of foreign investment poured into the economy. The depreciation of the South African rand over the past two years has also made the country’s real estate more attractive to foreign investors.

Listed Property Is an Alternative

If you’re looking to invest in real estate but don’t want to deal with the rigours of managing tenants, listed property is the route to go. Instead of buying physical property, you can simply put some money into a property fund, which invests in publicly-listed real estate companies.

The advantage of a property fund is that it exposes you a diversity of assets, including residential, industrial, retail properties. By investing in a fund, you can have stocks in different properties types such as shopping malls, office blocks, and townhouses.

“For a small investor, a buy-to-let property comes with a concentration of risk. You are spending a huge amount of money on one single asset and if the tenant goes wrong, you take a big financial knock,” explains John Loos, household and property sector strategist at FNB Home Loans. “Yes, the share market can be volatile, but if you bought into one listed property fund, you have already spread your risk into a number of properties, so the concentration risk isn’t nearly as much as with a buy-to-let property.”

South Africa boasts numerous real estate funds that have dominated the unit trust space over the last ten years. Some of the country’s top-performing property funds are the Absa Property Equity Fund (which was awarded the 2017 Raging Bull Award for Best South African Real Estate Fund), Stanlib Property Income Fund, and Prudential Enhanced SA Property Tracker Fund. There’s also Catalyst SA Property Equity Prescient Fund, Investment Solutions Property Equity Fund, and many others.

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How to Start a Property Investment Portfolio

Beginners Guide to Starting a Property Investment Portfolio

The idea of taking your first steps in building a property portfolio can seem unrealistic and a bit far-fetched, especially if you’re young, without extra financial support, and trying to establish your career.

For the majority of people, the key question is whether you can afford to buy your own property, and how to go about financing it.

The good news is that there are options open to first-time investors.

Step one: Find out what kind of finance you qualify for

It’s a misconception that you have to have stacks of capital in order to buy your first property.

Sure, having money in the bank definitely helps, but with a good credit record and some disposable income each month, the bank will more than likely grant you a loan.

Tip: Calculate how much finance you qualify for here .

Step Two: Maintain healthy credit

Pay off any existing (particularly high-interest, short-term) debt, and get your credit score as healthy as possible. If you don’t have a long credit history, save up a sizeable cash deposit before approaching a bank or bond originator for a loan. The usual deposit is about 10% of the total value of the bond.

Step Three: Do your research

Build confidence and master the fears that come with starting a new investment with thorough research and planning. Would-be property investors need to explore all of their options and educate themselves before taking action.

Some of the main points to considered are:

• How to structure the ownership investment (e.g. sole owner, partnership or trust)
• How to finance the investment and what assistance is available to you, if any (e.g. tax rebates, urban development zones, surety and investment partners)
• Which bank to use for the mortgage finance
• Where to buy
• What type of property to buy (sectional title, freehold, residential, commercial, etc.)
• And whether to renovate the property or not

Step four: Invest with partners

If you don’t have the means to invest on your own, approaching somebody who is willing and able to to help such as a parent, family member, partner or friend who can assist.

There are two routes here:

1. Ask somebody to stand surety for your bond

This would mean that your guarantor would stand surety for your bond repayments if you fail to do so on your own.

With rental properties this is often an attractive option as the guarantor would only have to pay the shortfall not covered by rental income, and in some cases rental income alone can cover monthly bond repayments.

2. Invest as a group

Another means of assistance in getting your investment started  is by going into the venture with additional investors.

This can be quite risky because if one person defaults on their portion of the payments, the responsibility will fall on the others, so it’s essential to invest with people you know, trust and that you are certain are in a position to always come through, i.e. close friends and family.

Be sure to have a thorough Partnership Agreement drafted by an attorney so that there is a mechanism to deal with any transgressions or situations that may arise.

The banks are likely to approve a bond that is held jointly by two or more people because it spreads their risk, and the combined salaries of the investors will likely be more than adequate for their loan criteria.

Tip: Calculate the costs of a join bond repayments here .

Step five: Start small

An important factor to consider is what type of property to buy and where and when to buy it.

In general, a low priced residential unit, in an area where year-on-year house prices are increasing faster than inflation and perhaps where future renovations can take place is a safe bet.

A R500 000 property at 10,00% interest will cost around R4,825 per month before levies and tax are included. If you are able to lease the property for around R4, 000 per month, the bulk of the bond and property cost is paid for through rental income, meaning that you are spending less of your own money out of pocket.

Step six: Add value

Value is added to your property indirectly through market growth, or directly through improvements to the property itself.

Another option is to add additional money to your bond, which will shorten your repayment period and save you considerable money in the long run.

When a property increases in value, this opens options for investors to secure a second bond, and increase their portfolio.

Step seven: Secure additional finance

As the value of your property increases, options become available (at the discretion of your bank) for you to secure a second bond.

For example, if you bought your property for R1 million five years ago, and the value has increased to R 1,5 million, it is possible for you to borrow the difference (R500 000) between your initial purchase price and the current property value.

This method is frequently used by property investors to expand their portfolios, but it demands thought and a good deal of research to grow your investments well.

Looking to buy or rent? Let or sell? Our property experts are on hand at https://www.rawson.co.za/commercial to cover all your commercial and industrial property needs.

Leave a comment, winning is great. happy clients everything.

Buying off plan: pros, cons and purchase tips for new developments

Age matters: why buyers should always check how old a property is.

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How to Finance a Property Development Business

Updated on 16 May 2022

A major challenge that new entrants to the property development business face is securing financing. A property development business needs a substantial amount of funds to purchase good investment properties (residential or commercial) with potential for great returns.

Property development involves a wide range of activities and processes from purchasing land to building and developing facilities and developing them to yield good sales or rental returns. Some examples of property development projects that a typical business would invest in is the conversion of old houses and office buildings into student communes and apartments. Property developers can also develop a plot and build new homes or flip an existing property for resale.

Funding for Property Development Businesses

On a business level, whether it is buy-to-let or for development purposes, entrepreneurs may look at funding through a bond from a bank, a specialist finance company or through private investors.

Before taking out a loan it’s important to first establish how much you can borrow and how you will be able to manage all associated costs of the development.

Banks and specialist finance companies may consider a number of factors before granting you a loan. This includes whether you have a good credit record and financial track record, and they may also require that you to pay a cash deposit.

Financing Options:

• Banks offer property finance in the form of a loan to developers, owners, occupiers and investors.
• Specialist finance companies provide access to a construction development loan/facility to kick start, construct and complete a development project.
• Private investors such as angel investors, friends and family, crowdfunding platforms etc. may be able to fund your property development project.
• Co-investors , pool funds with co-investors who then get a share of the profits.
• Home equity  refers to the portion of capital in your home loan that you have already paid off. It can be used to fund a second home loan on your investment property.

Read more: A Simple Guide to Angel Investors 

Financial institutions may request a borrower to put up some of their money to finance the property purchase. Lenders typically offer bond applicants 90% to 95% loan to value (LTV), while requesting borrowers cover the balance as a deposit.

Additional costs

As part of the planning stages of purchasing a property to develop it is essential that an investor put aside enough funds to cover construction and refurbishments costs of the property and any unforeseen issues which might arise.

Other costs to consider are: turnaround costs (transfer duties, fees, moving costs), special levies, insurance, inspection fees, permits, marketing expenses, etc.

Read also: Bus Stop Properties Founder Shares His Winning Formula 

How to successfully access financing for your property development business

First-time investors can increase their chances of securing funding by running professional enterprises.

It is important to remember that property investors are entrepreneurs, says Grant Smee, Managing Director of Only Realty SA and the founder of EPiC Networking and OUST Eviction Management Solutions.

“Investing in property is like owning a business and as such, transactions, management and administration duties will be constantly required.

“First-time investors who are unfamiliar with the requirements of these responsibilities should seek advice from industry experts.

Related: Starting a Business in South Africa

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4 TYPES OF PROPERTY INVESTMENTS IN SOUTH AFRICA

The South African property market has plenty to offer both novice and experienced real estate investors alike. Join us as we explore commercial and residential investment options and how to make the most of exciting opportunities when you find them.

Golden nuggets of property investment advice

• “Location, location, location” still rings true, but municipal logistics and future development plans are also also critical to consider.
• Match your purchase to its purpose. Carefully examine which property types best suit your intentions for returns.
• While commercial property represents opportunity for profit, residential land and homes should still be treated as an investment, as these appreciate in value over time.

The South African Context

Welcome to South Africa (SA), a country of sprawling landscapes and greenery, a rich historical and cultural heritage, and an exciting, high-potential property market for both first-time and seasoned investors. This southernmost part of Africa is not without its challenges, however, scenic destinations, land diversity, and the favourable exchange rate (to most parts of the developed world) make it an attractive option for investors – in both a commercial and residential context.

That being said, there are also some complexities in terms of purchasing property – from buying logistics per property type, to potential pitfalls and the difference in legal implications for each category. Get expert guidance from RE/MAX investment advisors, and make buying a new home or generating a new source of income is the exciting experience it should be. Let’s start here, by exploring 4 key property types and what you need to know about each one before you invest:

1. Vacant land: The gateway to property investment

Vacant land (i.e. land without a building present) is still widely available throughout SA and is sometimes not even connected to the electrical or sewage grid yet. In order to invest in vacant land, there are a number of conditions that you need to meet in order to get started.

Having as much upfront cash as possible allows you to purchase land ‘quickly’ and cover the landscaping costs, connection to water, electricity, sanitation, and transfer fees. These costs will have to be settled before one can begin building a house. You will also need to decide beforehand whether you intend to use the land for residential or commercial uses in order to determine the correct location and licensing.

2. Buying to reside or let: A cash cow or not?

Residential property is essentially buying a home that you can choose to live in yourself or to rent out (buying to let). If you decide to take the plunge and purchase a house and/or a flat, experts warn that you have to determine affordability and have a satisfactory credit record before you can get started.

If you are a South African taxpayer, buying a home that acts as your primary residence can be a good idea because you get a R2 million capital gains exclusion when you later decide to sell. If you choose to purchase a home as a source of rental income, you can reduce the amount of tax payable on the additional income received by claiming back on certain rental expenses.

3. Commercial property: When investors mean business

Investing in commercial real estate offers some unique benefits. These include a return on your investment, rental income, a variety of potential tenants, tax benefits, a good inflation hedge, and acquiring an asset with the potential to appreciate that can be used to leverage other investments. However, this is a complex market. Only those who know what they’re doing or who have the right support stand to make good returns on these kinds of investments.

When you decide to invest in commercial property you have 3 categories from which to choose:

• office buildings
• retail space
• industrial units

Finding true value for commercial properties is complicated, so it is best to work through a professional who either specializes in company evaluations or who is an experienced and reliable commercial real estate professional to make sure you are paying fair market value. In general, this value can be checked by calculating the replacement cost (i.e. the cost to rebuild the property from scratch). You could also work out the capitalisation rate, which is a valuation measure used to compare different real estate investments and is usually expressed as a percentage to show an investor's potential return on investment. Thirdly, you could calculate the gross rent multiplier (GMR). To calculate this, take the price of the property and divide it by the expected gross rent (e.g if the selling price is R100,000 and it generates a rental income of R1,000 per month, the GMR would be 100). Usually, the lower the GRM, the better the investment opportunity. These are just a few methods that can help provide an idea on whether the commercial property is listed at a fair market value.

4. REITs/Equity: Partial investment over full ownership

Real Estate Investment Trusts (REITs) are an excellent alternative for those who want to be less hands-on when it comes to property investment. These are companies that invest directly in at least 50% real estate debt by using mortgages. They are known as mortgage REITs, or mREITs for short. Equity REITs, on the other hand, are companies that have at least 50% of their assets in real estate equity. Hybrid REITs have both mortgages and equity.

Understanding the risks, to reap the rewards

Regardless of which option you choose, there will be some common risks associated with purchasing property for sale and determining. To help you better prepare for this, below are a few key investment terms associated with these risks along with their definitions:

• Risk of Loss and Default: the risk of losing your investment if you cannot pay back your loan.
• Interest Rate Risk: when the value of the bond or investment becomes risky after changes to the interest rate are made.
• Volatility Risk: when the value or price of a property asset fluctuates. If it goes down, you run the risk of losing money if you sell during the downturn.
• Vacancy Risk: is when you can’t rent out your property due to circumstances over which you have no control.

Let’s clear up a few frequently asked questions

What is the best real estate investment strategy?

The jury is still out on this one as it can depend on external factors such as market movements and earning potential, as well as personal factors such as budget. However, some lucrative examples are typically buying to rent or hold, buying to flip properties (increasing value and selling property for profit), and REITs.

Where can I find out how to buy property as a business?

The answer is right here. Buying property as a business is similar to purchasing as an individual but it doesn’t carry individual liability (personal insolvency). The purchase will be registered in the company’s name and when/if you sell, you are protected from Capital Gains Tax. Transfer costs may also differ but you can use this transfer cost calculator for an estimate.

Are the best property investments in Cape Town, Johannesburg or Durban?

This will depend on the type of property investment you’re looking to make. So, for example, if you want to invest in a commercial property for hospitality purposes, you might consider Cape Town, given the proximity to amenities and natural wonders. On the other hand, Sandton is a work and commercial hub which might make high-value rentals more attractive financially. While Durban can be seen as a hybrid of the two, making it a relatively cost-effective area to invest in for various purposes. These assessments don’t include other important considerations though, such as safety, value trends and accessibility to service providers.

Can you invest in property with no money?

In some instances, you could rent-to-buy, where you rent a property for a period of time, and at the end of the contract, you have the option to buy the home. This tends to be a good option for those with a bad credit rating who need time to rectify their credit score before they can acquire the funds to purchase a home.

Don’t bite off more than you can chew when it comes to property investments

Speak to a financial advisor to find out which option makes the most financial sense for your situation and seek out guidance from your local RE/MAX Office to find the best real estate investment opportunities. This will enable you to identify which types of property investments in South Africa are right for your needs while making smart purchasing decisions that can pay off in the long term.

*Disclaimer: The purpose of this blog is to provide a high-level overview of real estate investment options in South Africa. RE/MAX SA advises individuals to seek out professional advice before going ahead with any purchase. RE/MAX SA cannot be held responsible for any investment decisions made based on the content of this article.

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Property investment: A fine balance between risk and opportunity

Miguel Martins, Absa Portfolio Manager, answers the burning questions around property investment in the current environment.

1. What are the challenges facing property investors in the current climate?

Although there are several challenges brought about by the Covid-19 pandemic and economic depression, essentially there are four key risks that lead the pack:

Tenant Payment Risk ... the risk that existing tenants are not able to pay their full rent, or not at all, as salaries are reduced, and how sustainable employment has elevated as a major challenge in this economy. A reveal from credit agency TPN’s Good Standing Ratio supports this by showing a drop to 71% in Q2 2020, from an average of 81% in 2019, although there has been a strong recovery to 79% in Q1 2021. (The Good Standing Ratio indicates the percentage of tenants who pay their rent on time, or within an acceptable amount of time).

Rental increases … the risk that annual rents won’t increase as fast as costs and interest rates. Costs include levies, water, lights, and maintenance, whilst interest rates determine the monthly loan payment to be made.

Interest Rate increases … the South African Reserve Bank (SARB) has forecast rates to increase gradually over the next 12 months. This increases monthly home loan payments, squeezing net rental income made, and possibly leading to a rental loss. The danger is that rents usually don’t increase as fast as interest rates.

Vacancy Risk … the risk that a landlord may not find a suitable tenant to move into their vacant property and thus miss receiving a month’s rental income. This can either be due to lower tenant demand in that area, or the quality of tenants is low and the landlord chooses not to accept an application.

A good investor will consider the above risks and put risk mitigation plans in place, such as rental insurance, a savings pocket worth three or more months, and include value adds such as free Wi-Fi to attract quality tenants.

2. How is the digital age enhancing/enabling their property investment decisions?

Digital tools create an increased level of accessibility to information, for investors and tenants. There are many digital resources where investors can search and compare prospective properties as they seek out their next investment opportunity. For example, at Absa, we provide many such tools. One is a result of our partnership with the South African Property Investor Network, which provides educational content online, and platforms for investors to learn from industry experts as well as network with each other.

TPN is another strategic partner of Absa Home Loans and produces a Suburb Report in a digital format, whereby investors gain insights into average selling prices and expected rentals, the previously-mentioned Good Standing Ratio, and other key investment indicators. These are invaluable when considering investing in an area where the investor is possibly new to and not familiar with.

Tech-savvy tenants are finding that they now have easy access to a list of available rentals in an area, and landlords are now paying special attention to their competing listings and providing the best rental offering at the right price point, in good condition, and with attractive facilities.

3. What are the specific information sources that property investors should be using to gain deeper insights into markets?

Investors, as said, must use data to support the direction of their strategy, as well as their specific investment decisions. Absa recommends the following five resources must be on an investor’s list to gain insights into the current property investment market:

TPN issues a Quarterly Rental Report which talks to the various factors in the rental market, with insights on what is driving these, and the direction of such trends.

TPN’s Suburb Report provides a data-driven analysis at a suburb level based on its own data sources, deeds office data, and census data. This is a great resource to consider when investing in a new area, or comparing an investor’s own performance to the area’s performance.

• Absa Homeowners Sentiment Index

Absa Homeowners Sentiment Index is a quarterly survey of over 12,000 consumers, consolidating their views on various themes of property ownership, renovation, and selling and investing. In the latest Q2 2021 report, for example, investors continued to survey very positively relative to investment in property, and it also highlighted some of the existing risks.

• Interest rate forecast reports

The SARB, commercial Banks, and other institutions regularly issue economic reports on their expectations of the outlook for interest rates. These forecasts tend to vary between institutions, but the supporting insights are valuable in gaining a sense of direction of the largest single cost driver for the investor.

• Network of investors, sales and lettings agents for area-specific views

There is nothing like experience and on-the-ground views. Building a network of fellow investors not only allows one to contextualise and digest the information for the data sources mentioned, but also provides practical lessons and solutions on how best to manoeuvre the challenges of building and managing a property portfolio.

Building a trusted network of estate and lettings agents is not only valuable in terms of sourcing investment opportunities and property management support but also obtaining their views on local trends. Be warned though, this group of professionals need to be, and are, inherently optimistic about their markets.

4. How popular are coaching and training programmes for property investors?

There is a plethora of articles, books, YouTube videos, and other resources that will guide a property investor but coaching remains a key method to obtain personalised input into your strategy. The benefit of a coach is that you have an experienced person, who ideally is an active and experienced investor, who can share their knowledge and experience. They can also provide input as the new investor designs a strategy and makes purchasing decisions, and challenges one to consider alternative strategies as well to stretch beyond comfort zones. Although property investing can be done alone, investing in an experienced coach or training course, will help avoid mistakes that have a high cost in the long run.

The key to finding the right coach is determining whether that individual understands your strategy and your personality, and it is a good idea to ensure you obtain several referrals. Online training programmes are another route, which also presents an opportunity to engage with other investors and thereby build up a network of similarly-minded individuals. Programmes that are conducted by an instructor/trainer also provide the opportunity to engage with the instructor on various subjects, as well as offering a chance to bring your own experiences into the discussion.

An often overlooked aspect of growing your property investment knowledge is an investment in yourself. Investors often shy away from spending a couple of hundred Rands for a day’s training, or even a couple thousand Rands for a series of coaching sessions, due to the ‘cost’ of the programme. But this same investor will be happy to commit to a R1-million property investment and pay R100,000 or more for transfer costs and a multiple of that in renovation costs.

A golden rule is to invest in yourself before you part with your cash on a property deal. Learning through others is low-cost, even free, but your own lessons may cost you hundreds of thousands of Rands.

5. Best overall advice for those dipping their toe into the property investment environment?

Seek out active Facebook and Social Media groups where users are regularly asking property-related questions. There is a high quality of response and support coming from others in the group. In this regard consider the SA Property Information Hub, hosted by SA Property Investor Network, as a valuable resource.

Remember that ultimately you are responsible for your own decisions. No matter what a training, coaching, or social media programme presents or discusses, you sit with your own decisions. While it is highly recommended that you access as much information as possible, in the end, it is up to you to digest that information, which will inform your decisions.

Lastly, but possibly most importantly, treat your property investing journey like a business and not a hobby. Even if after one or two investments you decide this is not for you, the effort put into identifying and purchasing quality properties will pay off in the long term. And if you decide to continue growing your portfolio, your earlier properties will contribute to the multiplier effect that comes with the benefit of holding quality assets with sustainable rental income streams, for the long term.

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How to create a rental property business plan (and why you need one)

Last updated: 21 October 2022

Take it from someone who’s spoken to a lot of investors over the last few years: almost everyone who achieves great success started out with a solid plan.

All businesses start out with a plan . Even if that plan is just “I think I can buy this widget for £1 and sell it for £1.50”, it’s still a statement of what the business will do and how it will make a profit.

But many – in fact, most – wannabe property investors start out without even the most basic of plans. Often, people have nothing more than vague thoughts like “ property prices go up, so it’s a good investment ” or “ most wealthy people seem to own property ”.

It might feel like sitting around planning is just delaying you from getting out to look at properties and start making money. But take it from someone who’s spoken to a lot of investors over the last few years: almost everyone who achieves great success started out with a solid plan.

(Or to put it another, more painful way: almost everyone who didn’t start with a plan ends up disappointed with where they end up – however much effort, money and time they put in.)

What does a rental property business plan look like?

It certainly doesn't need to be 100 spiral-bound pages of projections and fancy charts. In fact, the best plan would be so simple that it fits on the back of an index card – meaning that you can commit it to memory and use it to drive every decision you make.

In order to get to that simplicity though, you might need to do some seriously brain-straining thinking first.

It's not easy, but it is simple: your plan basically just needs to set out…

Where you are now

• Where you want to get to, and
• What actions you're going to take to bridge the gap

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To give a cheesy analogy, you can't plan a route unless you know where you're starting from.

Working out your starting point is the easiest part, because it involves information that's either known or easily knowable to you.

You'll need to be clear about:

• The amount of money you've got to invest
• The amount of savings you can allocate to property investment in future years
• The time you can invest each week or month
• The skills and knowledge you can apply to your property business

Note that I said it was the easiest part, but still not easy – because it involves honesty about what you can commit, and self-knowledge to determine where your strengths lie.

Knowing how much money you've got to invest should be straightforward, but it's probably worthwhile speaking to a mortgage broker to check that you'll have borrowing options – because this will determine your total investment figure. A broker will also be able to tell you about your options around releasing equity from your own home, if that's something you want to consider.

I'd also strongly encourage you to consider what “emergency fund” you want to keep in cash, and deduct that from your total investable funds. I suggest having at least six months' expenses in the bank at all times: the last thing you want is to plough every last penny into investments, then lose your job the next day and be unable to pay your bills.

Where you want to get to

So now you know where you're starting from, where do you want to end up? In other words, what's your goal?

Yes, you want to be “rich”, or “secure”, or “build a future” – but what does that actually mean, in pounds and pence terms, for you?

And just as importantly, when do you want to have achieved that?

You might be surprised by how much thought is involved in answering these questions properly. It's easy to throw around terms like “enough to fund my lifestyle” and assume that it might involve an income of £10,000 per month, but it's another matter entirely to look honestly at your ideal lifestyle and determine what a genuinely meaningful figure is.

The same is true for “when” – and it's an often-ignored factor that actually cuts to the heart of the most basic of investment decisions.

For example, take a choice between two properties:

• Property 1 will give a return on your investment of 15% but will probably never increase in value
• Property 2 will give a return of 7% but has the potential to double in value over the next decade.

If your goal is to create a certain monthly income within three years, the Property 1 is likely to be a better choice. Growth is unlikely to happen to any great extent over that time, so you need to optimise for cash in the bank right now.

On the other hand, if you have a decade before you want to have achieved your goal, Property 2 is probably the better bet. It very much is a “bet” because you're taking something of a gamble on capital growth, but it's got a lot of time to happen – and when it does, your returns will dwarf the higher rental income you'd have made from the other property.

That's just one example of why making even simple decisions in your property business are impossible without having that most basic ingredient of your plan: where you ultimately want to end up, and when.

So, by this point in the plan you need to:

• Assess your finances to build up an honest picture of where you are now
• Put some serious thought into where you want to get to, and when

If you need help with this goal-setting process, I co-own Property Hub Invest which offers free strategy meetings . It's often easier to work this stuff out in conversation with someone who knows their stuff, rather than doing it all in your own head.

That's a great start, but for most people it'll produce an uncomfortable insight: the gap between where you are and where you want to be seems impossibly large! With the resources you've got now, how are you possibly going to reach your goal in a sensible period of time?

Well, that's where it's time to start thinking about the details of the third step: the strategy you'll use to pursue your goal.

A strategy to bridge the gap

The steps you take to get from Point A to Point Z are what's commonly referred to as your strategy – and strategy is a vital component of your business plan.

The way I like to think about strategy is the way you compensate for a lack of cash . It's an unusual way to look at it, but I find it useful – because it tells you (given your timeframe and your goal) how much heavy-lifting your strategy will need to do to keep you on track.

Think of it like this: if you had £10m in the bank and your goal was to make an income of £5,000 per month within a year, you wouldn't need any strategy at all . You could just use your £10m to buy any properties, anywhere – you wouldn't need to maximise the rent, manage them well or even keep them all occupied at all times! You'd be able to buy so much property that you really couldn't fail.

Sure, it'd be a pretty stupid thing to do – you should really have had a more ambitious goal – but you get the point.

Obviously, most of us aren't in that position – and that's why we need a strategy.

So, just what position are you in?

A rule of thumb

A handy way of looking at it is to take the amount of money you've got to invest in property, and assume that you can get a 5% annual return on that money (ROI) – which is a rough rule-of-thumb for a normal property bought with a 75% mortgage.

So, if you've got £100,000, you can generate a (pre-tax) profit of £5,000 per year – or £416 per month.

That's unlikely to be enough to hit most people's goals – but then there's the time factor. If you save up the rental income for 20 years, you'll be able to buy another batch of properties just like the first – so you'll now have income of £832 per month.

If you're happy with that, then you've already got your strategy: buy properties that will give you your desired ROI, then wait!

Portfolio-building strategies

But most people will want more than that: we've hardly been talking about life-changing sums, and 20 years is a long time to wait before you can buy again!

This is where more of an advanced strategy comes in, allowing you to get better results, faster.

This might include:

• Buying properties and adding value, so you can refinance at the higher value and buy your next property more quickly ( learn more about this strategy )
• Buying properties at a discount, allowing you again to refinance at the higher value and move on to the next one
• Turning properties into HMOs, so you can generate a higher ROI on them
• “Flipping” properties for a profit, so you can replenish your cash more quickly ( read my guide to flipping )

…or something else entirely.

I go into different strategies in enormous detail in my book, The Complete Guide To Property Investment .

Simply appreciating the need for one of these strategies from the start is a really big deal.

Most people don't: they'll rush in, use all their money to buy properties that generate (say) £500 profit per month, then…what? They'll be stuck – because they didn't go in with a plan for how they were going to get to their target number . They'll effectively be starting from scratch, having to scrape together the money to go again.

It's extremely common, and it doesn't surprise me – but it does frustrate me. If they'd started with just a bit of time making a plan, they wouldn't have made this mistake – because it would have become very obvious that they wouldn't reach their goal without applying some strategy.

Any of the strategies I listed (or a different one, or a combination of several of them), when applied effectively, can get you to where you need to be. But that's not to say that all of them will be equally good for you. Each of them has different risk factors, requires different time commitments, are suited to different skill sets, and so on.

That's why this is your business plan: copying someone else's homework isn't going to do you any good, because their skills, attributes and preferences will be different from yours.

For example, one person's plan might be to get their hands dirty by renovating properties for resale – completing two projects per year, and using the profits to buy an HMO. Within five years they'll have five HMOs, which will give them all the income they need.

Someone else might be hopeless at anything hands-on, but a master negotiator. Their plan could be to buy at enough of a discount that they can pull at least half of their funds back out again by refinancing – and keep doing that until in ten years' time they have 15 single-let properties giving them their target income figure.

(That's why when someone emails me asking if their strategy “sounds good”, I have to say that I don't know: usually it sounds like on paper like it would work for someone , but I have no idea if they're the right person to execute it.)

So, coming up with your strategy involves:

• Starting with an assessment of where you are now
• Deciding where you want to get to, and by when
• Seeing how far you'll fall short by just buying “normal” properties
• Thinking about your own skills, time and preferences to choose which strategy (or strategies) you'll use to fill in the gap

It might take a while, and that's OK – it's not an easy decision . To take the pressure off though, remember: your plan isn't set in stone. It's important to start with a clear vision and not get distracted by every new opportunity that comes your way, but every plan is just a starting point: you'll be seeing what works, reviewing and adjusting course along the way.

Once you've got a strategy down on paper, that's a huge step – and you should congratulate yourself, because it's a step that most people will never make (and will suffer for).

But of course, the act of writing the plan isn't going to magic it into existence: you need to get out there and execute on the plan.

Turning your property business plan into action

Having an appropriate goal and a solid strategy to get you there are essential, sure – but nothing is going to happen until you actually take the steps that are necessary to execute that strategy.

If you don't take the time to identify the steps and make a plan to carry them out, you'll end up in “pulling an all-nighter the day before your homework is due in” mode. And you don't want that: it's no good setting a five-year goal, feeling all virtuous for being such a strategic and big-picture thinker, then realising in four years and 364 days that you've not actually got any closer towards making it a reality!

So let's get those steps in place. And the good news is…it's really simple. (The best things usually are.)

Breaking it down

However big, ambitious and far in the future a goal seems to be, all goals are achieved in exactly the same way : by breaking them down into individual tasks, and working through those tasks one by one.

As you work through those tasks, it’s important to have sub-goals as “checkpoints” along the way.

Sub-goals are how you stay on track: by setting a deadline for each sub-goal, you can make sure that your progress is fast enough. They also keep you motivated, because it means you’ll always have a small “win” on the horizon: you won’t just be looking at the main goal (potentially) years off in the future. Think of them as mile markers at the side of a marathon course.

To put it another way:

Small task + Small task + Small task = Sub-goal Sub-goal + Sub-goal + Sub-goal = Overall goal

It's those small daily tasks that are the foundations of your achievement. And that's the beauty of a good plan: all you need to concentrate on is ticking off your tasks each day, and your overall goal is achieved automatically!

So, this final step in your plan is about breaking that big goal down into sub-goals, and those sub-goals down into bite-sized individual tasks. That's it!

As you break it down, there are a few things I find are useful to think about…

One-off tasks v recurring tasks

Your business will have two types of task:

• One-off tasks , like finding a mortgage broker
• Recurring tasks , like viewing properties and making offers

These two types of task will both appear in your weekly, monthly and quarterly to-do lists. A useful way of planning your time is to start by filling in your recurring tasks – like going through portals to find new potential acquisitions every day, and calling agents to follow up on offers once per week – then adding your recurring tasks on top.

By thinking about both types, you'll make sure you're not dropping the ball on the important day-by-day stuff, but you're also not ignoring the big-picture one-offs that are going to make a huge difference to your business in the long run.

The first, simplest step

Just like you break a goal down into sub-goals and sub-goals down into tasks, I favour breaking every one-off task down into the smallest possible unit .

For example, “find a mortgage broker” could be an important one-off task for you, but it's not something you can just sit down and do until it's done. Because it seems nebulous and you can never identify a block of time when you can do it from start to finish, you can end up never doing it at all.

Instead, you'll make yourself feel better by ticking off smaller tasks that seem easier – but are often less important.

The solution is to break every task down into as many sub-tasks as possible. So instead of “find a mortgage broker”, the tasks become :

• Email 3 contacts to ask for recommendations
• Post on The Property Hub forum to ask for recommendations
• Email everyone who is recommended to set up a quick call
• Draw up a shortlist of 2-3 people to have a longer conversation with
• Pick a winner

Doesn't that seem much easier already? You can imagine sitting down and bashing out the first task in five minutes right now, then you're underway!

Who will do each job?

Here's a potential lightbulb moment: you don't have to do everything in your business yourself.

Any business has different “functions”, or departments – like sales, manufacturing, and admin. A property business is no exception.

The basic functions of all property businesses are the same:

• Acquisition
• Refurbishment
• Refinancing/selling

The types of task that fall within each function will depend on your business plan. For example, if your aim is to find properties you can buy “below market value”, acquisition could be a major part of the business – involving direct-to-vendor marketing, networking with estate agents, and attending auctions.

On the other hand, if your model involves buying properties that you think will experience strong capital growth, there could be a lot more tasks in the “research” part of the business – and acquisition could be very straightforward once you’ve identified the opportunity itself.

Could you do every task within every function yourself? Maybe.

Could the business achieve better results if you bring in specialists to do what they do best? Definitely .

You could go big and employ an assistant to view properties and make offers for you, or just make sure you outsource functions like management and accountancy to the relevant professionals.

Whatever you do, once you start thinking about your property venture as a business with various departments, you'll start to break away from the idea that this is something you have to do all on your own – and that's a very powerful insight.

OK, this has been a long one – but we've covered a lot of ground.

To recap, those critical steps are:

• Assess where you are now
• Work out where you want to be, and by when
• Outline a strategy to get you there
• Fill in the detail, to get you from “big picture” to individual steps

It's a process that's worked for me, and I've seen it work for many investors I've encouraged to put it into action too.

Its power is in its simplicity: you take the time to intelligently decide exactly what you need to do, then you figure out a way to (to borrow a registered trademark) just do it . As long as you show up and work through your to-do list each day, the big, scary, long-term goal takes care of itself!

Of course, you'll need to assess your progress and adjust course along the way: nothing will pan out exactly as expected, and there's a lot that can change over a timespan of several years.

But by having your plan, what you won't do is get distracted by every new idea that comes your way – researching HMOs one day, and holiday lets the next – and end up getting nowhere.

(You'd be amazed by how many plan-less people that description fits to a tee.)

So now you know how to put a property business plan together. It's not a plan that will necessarily get you funding from the bank, but it's something more important than that: a plan you can use every day to make sure you stay on track to hit your goals.

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THE proportion of European firms that rank China as a top investment destination has hit a record low, a European business lobby group said on Friday (May 10), warning that it could take years to restore confidence in the world’s No 2 economy.

The European Chamber of Commerce in China said in the latest edition of its Business Confidence Survey that the outlook for doing business in China was also at its lowest in the report’s 20-year history, with over a quarter of respondents pessimistic about their current growth potential and 44 per cent downbeat over future prospects.

With China’s economy facing headwinds and President Xi Jinping urging self-reliance and for officials to push on with a production-focused, debt driven development model despite pushback from the West, foreign firms are feeling less welcome than before.

EU Commission chief Ursula von der Leyen and French President Emmanuel Macron urged Xi on Monday to ensure more balanced trade with Europe, but the Chinese leader showed little sign of being ready to offer major concessions while in Paris.

BASF, Maersk, Siemens and Volkswagen are among the members of the chamber.

Just 13 per cent of firms said they currently see China as a top investment destination, the chamber said, down from 16 per cent in 2023 and far lower than during the pandemic, when Beijing’s strict zero-Covid regime saw that figure fall from one-fifth to 17 per cent in 2019, 19 per cent in 2020, 27 per cent in 2021 and 21 per cent during 2022, the year the curbs were finally lifted.

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“The lifting of pandemic-related control measures initially provided companies with a sense of optimism,” the chamber said. “However, it soon become evident there would be no rapid recovery.”

“China’s deeper structural issues – including sluggish demand, high levels of government debt and the continued challenges in the real estate sector – were going to continue affecting the prospects of both domestic and foreign companies,” the chamber added.

The pandemic and a property crisis have laid bare the limits of China’s development model, analysts say. And as China’s investment-consumption imbalance is deeper than that of Japan in the 1980s – before its infamous “lost decades” – the economy risks slowing to such an extent that it feels like it is in recession.

European firms are feeling the pinch, the chamber said, with the number of companies reporting revenue increases also at its lowest on record. In tandem, close to 40 per cent of respondents said China’s ailing economy was their biggest business challenge, with a slowing global economy coming in a distant second at 15 per cent.

“Companies are continuing to shift investments that were originally planned for China to alternative markets that are perceived to be more predictable, reliable and transparent,” the chamber said.

“As investment decisions are made in cycles and are not taken lightly, reversing them will not be possible overnight.” REUTERS

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